Thedayisbrave has recently helpfully reminded me that we bought our first rental a year ago (she was our agent), the time really flies! Since it’s been a year I wanted to share an update of how it’s going.
First, the bad news is in 2016, we were cash flow negative $321.78 overall (did not include any tax benefits or principal pay-down in this calculation). This is mostly because I included the cost of the appraisal and home inspection in the first year numbers (~1,000), if I had amortized them over the first few years of ownership, we’d have been positive a little bit. We also had 9 weeks of vacancy. First because we bought the property right before I had a work trip and then two of us were on vacation so we couldn’t effectively market it right away. We lost almost 4 weeks because of this. Second, we were asking too high of rent for the area at first. It took us a little while to find the right price where it was snapped up.
The first lease is up at the end of July and hopefully our tenants will stay. We like them, they’re low maintenance and have paid on time every month. We just approached them to see if they want to stay are waiting for their reply. We’re not raising the rent this year (I’m sure there will be comments about this choice!) because rent really hasn’t gone up in the area and it would be a big PITA if they decide to move out since our wedding is at the beginning of September, so we’ve got a lot going on in August. Next year we’ll do an increase.
We’ve had a few maintenance items, the first was the washing machine drain was thoroughly blocked. We tried to clean it ourselves, had a local handyman come snake it and then finally had roto-rooter come out. After the handyman came it seemed ok until our tenants moved in and tried to do more than one load of laundry in a row. Now we have a roof leak that we just got estimates to repair but it will probably suck up our maintenance budget for the year. Zephyr911, you are probably right that the budgeted amount is/was too low, though in 2016 it was enough for our washer drain issues.
We both feel really good about the purchase and are so happy we made it! It is amazing how quickly money accumulates in the rental’s account even with the PITI and other expenses coming out and us not really cash-flowing much. Seriously, I’m amazed by it. The maintenance funds are accruing there of course for later use and our management fees paid to ourselves and the budgeted cash flow.
At the present time we’re not planning to buy another rental because we’re paying for most our own wedding in September ($$$ - we should’ve eloped!). Our original plan was to buy a new house for us to live in, and turn out current two bedroom townhouse into rental #2 but since I didn’t have a clue what made a good rental when I bought it, only a vague idea that I’d do that with it in the future, at the current rents it would only break-even. So we’ve agreed to stay put for 2-3 more years and get another planned rental first than either rent or sell this one depending on the markets at that time. I am also toying with the idea of getting my own RE license starting next spring, so maybe by the time I’ve finished that we’ll have rebuilt our war chest sufficiently to start looking for #2.